Tax deduction change would boost ad revenue $250-$450M: Friends

Removing tax deductions for advertising on non-Canadian online media outlets could help the beleaguered local media and news sectors, while saving the government money, according to a new paper from watchdog group Friends of Canadian Broadcasting. The Income Tax Act eliminates or limits the “deductibility of advertising expenses on foreign newspapers, periodicals and broadcasters, hence providing a material incentive for advertisers to choose Canadian alternatives,” but advertising expenses on foreign Internet-delivered media are fully tax deductible, the report released Monday said. It’s an interpretation that hasn’t been updated in 20 years, based on case law as old as 1935 and “definitions of ‘newspaper’ and ‘broadcasting’ that do not reflect developments in these on-line media since 1996,” the paper, authored by consultants Peter Miller and David Keeble, argued. Over those two decades, Internet ads have grown to account for more than one-third of all Canadian advertising revenues, the paper noted. “Almost 90% of Canadian internet advertising accrues to foreign-owned internet sites and platforms, with a significant majority of revenues going to” the largest United States-based platforms, like those from Facebook Inc. and Alphabet Inc.’s Google and YouTube. The paper said that broadcast deductibility rules were introduced in 1976, when American TV stations operating on the U.S. border accounted for 10 per cent of all Canadian TV ad spending, and argued that if the 10 per cent loss “was considered a serious problem in 1976, today’s one-third loss should be considered a national media crisis.” It estimated that if 10 per cent of newly non-deductible Internet spending returns to Canadian outlets, “this would represent an influx of $250 to $450 million annually in incremental advertising revenue for a Canadian media sector that is under serious threat.” The report added: “A massive policy problem (the loss of local media & and news) could be solved in a way that actually saved government money.” Questions about taxation of foreign online services have been raised recently in both the House of Commons standing committee on Canadian Heritage study on media and local communities and Heritage Canada’s review of Canadian content in a digital age.

Tax deduction change would boost ad revenue $250-$450M: Friends

Brief | January 23, 2017

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Tax deduction change would boost ad revenue $250-$450M: Friends

Brief | January 23, 2017

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